Political, Economic, and Social and Technological Factors in Business - Essay Example

?PESTEL In organizations, the problem solving, decision-making and thereby strategy formulation processes has to be carried out in a careful and at the same time effective manner for the organization to achieve success. The organization should seek to solve a problem systematically by following a sequence of steps so there are no drastic changes in the organization and the employees have the time to cope with the on going changes (Beardwell and Claydon 2007). When carrying out the above mentioned processes, organizations have to focus on its internal as well as the external environment, and study the factors that are at play in those environments. Only if those factors particularly the factors in the external environment are aptly studied, optimal strategies can be formulated. Several mechanisms exist to study and audit the external environment and one of them is PEST. PEST Analysis, which stands for Political, Economic, and Social and Technological factors, is an important tool used for solving problems and for coming up strategies based on the market factors and also helps in understanding market growth thus aiding in the determination of the position, potential and direction of a business. This analysis is used to review strategy or position, a proposition or an idea. It “encourages proactive thinking rather than relying on habitual or instinctive reactions.” (Agarwal and Ramaswami). Among these factors, technological factors in the external environment could play a major impacting role in the functioning of the organization. Technology is something, which cannot be ‘static’, and will keep on evolving and upgrading. That is, new and new advanced technologies will be invented and developed throughout the world, without any saturation. On those lines, sizable technologies are being developed that will have applications in the various industries or businesses, thereby impacting the functioning, decision making and strategy formulation of organizations operating in those industries. Particular technologies are being developed to have applications in particular industry, and so the organization has to function accordingly. Banking industry is no exception to this trend, as many banking centric technologies are being developed in the external environment, which is having impact on the functioning of various banks, particularly in relation to their customer service and Customer Service Management (CRM) (Buttle 1996) Before the advent of computers, information technology and importantly Internet, customers selected their banks based on how much well-located the branches are from their homes or offices. Then with the arrival of new technologies in the business of bank, such as Internet or online banking, credit cards and ATMs, customers can freely select any bank for their transactions. So, technology is playing an optimal role in enticing the customers, with the number of customers increasing manifold. “Underpinning all of these changes in the way consumers live their lives are developments in IT and the subsequent creation of the interactive market-place…IT was used mainly to…sort our finances” (Baker 2003). The other reason why technology or the technological factors that arise in the external environment needs to be given utmost importance by the banks is because the customers are becoming well versed in technology particularly IT, with their profession and affluence playing a contributory role. “Your customer base is changing forever. Your customers are becoming more affluent, increasingly comfortable with technology, demanding of new financial services.” (Shesbunoff 1999). Because of this crucial role played by technology in the life of the prospective or intended customers, apt and adequate technological aids needs to be installed as part CRM. Apt and adequate in the sense, banks and financial services can use supercomputers to retrieve customer’s needs, but at the same time they can also use smaller systems to retrieve the same customer’s needs. So, the key is not the size of the technological setup but the apt usage. “The very largest banks with their supercomputers can manipulate their customer information in blinding speeds. But today even small community banks can cost effectively leverage computer technology” (Shesbunoff 1999). The other technology based consideration that needs to be taken into account as part of CRM is the new technological advancements especially mobile phones with internet. “Information on the move is the current phase of IT development. The shift to mobile commerce is being driven by cellphone ownership” (Baker 2003). That is, with many customers using their mobile phones to manage their financial aspects including bank accounts, technology as part of CRM needs to cover that aspect. Technological factors that need to be incorporated as part of CRM implementation should be considered thoroughly by the banks. (Foss and Stone 2002) From this focus on banking industry and its organizations, it is clear that various banking related technologies are being developed and available in the market, and the adoption of these technologies are orienting the decision making, strategy formulation and thereby functioning of the organizations. With customers being the key determent for the adoption of technology, the banking organizations are adopting or should adopt the banking-centric advanced technologies that are being developed in the external environment. Automation and computerization has become one of the key necessities for any organization to survive and succeed in the current competitive times. To incorporate technology or specifically Information technology effectively inside an organization certain factors has to fall in place. (Rigby, Reicheld and Schefter 2002). ormation Technology (IT) and its associated tools will be installed in an organization mainly based on its necessities. If the owner or leader or manager of the organization has good knowledge and keeps tab of the technological innovations and upgradation that are taking place in the external environment, he/she will be able to incorporate that technology optimally. The “more and higher education an owner obtains, the more likely he/she is exposed to new technologies and understands the value of technologies.” (Chuang, 2007). In addition, if the owner has good IT knowledge, he/she can personally customize the technological tools according to the needs of the organization. Thus, from the above analysis of the PEST factor of technology, it is clear that technological developments in the external environment will surely impact organizations’ functioning including organizations in the banking sector, pushing them to incorporate those technologies for customer satisfaction. In addition, if the leader of manager has good understanding of the technology and its applications that is happening in the external environment, it would only encourage the organization to adopt technologies in a more effective manner. References Agarwal, S and Ramaswami, SN, Choice of foreign market entry mode: impact of ownership, location and internalization factors, viewed on November 10, 2011 http://www.francescopignatti.com/eng/index.php?option=com_vfm&Itemid=37 &do=download&file=MM%7CNIKE+CASE%7CNike-Theory.doc. Baker, S. 2003, CRM in the context of new consumer marketing, Interactive marketing, vol.4, no. 4, pp. 320-329. Beardwell, J and Claydon, T 2007, Human Resource Management: a contemporary approach, Financial Times, Prentice Hall, Harlow. Buttle, F 1996, Relationship marketing: theory and practice, SAGE, London. Chuang, T., Nakatani, K., Chen, JCH and Huang, L 2007, Examining the impact of organisational and owner’s characteristics on the extent of e-commerce adoption in SMEs, International Journal of Business and Systems Research, vol. 1, no. 1, pp. 61-80 Foss, B and Stone, M. 2002, CRM in Financial Services: A Practical Guide to Making Customer Relationship Management Work: International Business Machines Corporation, Kogan Page Publishers, London. Rigby, D, Reicheld, F and Schefter, P 2002, Avoid the Four Perils of CRM, Harvard Business Review, vol. 80, no. 2, pp.101-110 Shesbunoff, A 1999, Winning CRM Strategies, ABA Banking Journal, Vol. 91. Read More